What is the best week of the month to trade index funds

Does it make a difference during which week of the month you buy or sell your index funds? At Stock Trend Investing we dived into the data and present you here with our conclusions.

We haven’t just looked at every month during the last 13 years. We have also looked specifically at the months that follow directly an “Up” or “Down” trend expectation from Stock Trend Investing. The results are different for each of the considered cases.

Each and every month

When we consider every month of the last 13 year, we come to the following conclusions for what happened on average.

The first trading week in a month has an average closing price that is 0.2% higher than the average daily closing price for the stock market index that month.

The fourth trading week in a month has an average closing price of 0.2% lower than the average daily closing price for the stock market index that month.

The second and third trading weeks in a month have an average closing price that is equal to the average daily closing price for the stock market index that month.

Thus on average during the last 13 years, you could have gained a small statistical advantage to always sell your index funds during the first trading week of a month and to buy them always during the fourth trading week of a month.

It is different for the months following an “Up” or “Down” trend expectation from Stock Trend Investing.

Months following an “Up” Trend Expectation

13 Years hold a total of 156 months. During these 156 months, the Stock Trend Investing system gave 49 times an “Up” trend expectation for the stock market index that we have used as example here.

When we look specifically at the months following such an “Up” expectation, we have the following conclusions:

The first two trading weeks of the month have an average closing price that is 0.4% lower than the average daily closing price for the stock market index that month. The other trading weeks have a higher than average closing price.

Stock Trend Investors, who increase their investments in index funds following an “Up” trend expectation, would have had a small statistical advantage to do this during the first two trading weeks of the month. Note the difference with the conclusion for all 156 months where the fourth trading week of the month would give statistically the best price of the month.

Months following a “Down” Trend Expectation

During the 156 months, the Stock Trend Investing system gave 20 times a “Down” trend expectation for the stock market index that we have used as example here. When we look at these 20 months, we come to the following conclusions.

The first two trading weeks of the month have an average closing price that is 0.7% higher than the average daily closing price for the stock market index that month. The other trading weeks have a lower than average closing price.

Thus, Stock Trend Investors who decrease their investments in index funds following a “Down” trend expectation would have had a small statistical advantage to do this during the first two trading weeks of the month. That makes sense in a down trend. Note that the advantage is more than 3 times bigger than the average advantage for the last 156 month to sell during the first trading week.

The conclusions above are based on data for the German DAX index. However, since markets globally follow each other pretty well on a day to day basis, these conclusions could also be an indication for other stock market indices around the world.

The conclusions make sense when you consider the validity of the trend expectations. When the trend is expected to be up, the second half of the month has on average a higher closing price than the first half. And when the trend is down, it is the opposite. Makes sense, isn’t it?

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Interesting analysis and it makes total sense when you think about it logically.

From now on, as soon as the STI site gives me the indication, I'll be logging onto my online broker and taking action straight away.

The margins may not seem huge, but by simply following this advice and buying/selling within the first two weeks of the month, I reckon I will easily cover my membership fees to the STI site over the course of the year... nice one!

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